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An Example of Centrally Managed “Capitalism”

In the People’s Republic of China, reportsThe Wall Street Journal, the urban population has, for the first time in Chinese history, now exceeded the rural population. This situation serves as a backdrop for some of the problems in China’s centrally managed economy.

One problem involves access of the newly migrated people to public services in their new cities—accesses their already resident neighbors have. It seems Chinese can only have access to public services in the towns and villages they’ve just left, because that’s where their families have been registered. Under China’s household registration system—intended to rationmanage access to such services so as to prevent their being overwhelmed—only registered households can avail themselves of the public’s weal.

More importantly, such property rights as a Chinese citizen might have, have gone by the boards. It seems that city—and village—managers are seizing farmers’ land that lies on the margins of the rapidly growing cities, and on the edges of the just departed villages, too. In fact, farmers on the outskirts often are willy-nilly uprooted and moved into apartment complexes so their land, including the old homestead, can be consolidated into larger tracts. Bigger farmers know better how to run the farmland, after all, and more lucratively, developers can take the land out of production and turn it into shopping malls and luxury homes for the growing populations of middle class and wealthy. Just to rub salt into the farmers’ wounds, the urban leadership pays the farmers a token for their land (it’s not an outright confiscation), and then charges market rates as they flip the land to developers, pocketing the difference—ostensibly for the town or city budget.

The Chinese government seems powerless to stop this. The local central managers insist they need the income from their land flips to “maintain growth, service debt and top up their budgets.” Further, pressure to continue the practice will continue: Beijing intends to build an additional 36 million units of affordable “social housing” just in the next 5 years. Those buildings have to sit somewhere. And this doesn’t consider the ordinary housing building that will occur for those who don’t need “social housing,” or all the building for all the supporting infrastructure—schools, shopping malls, government buildings, roads and streets, and the like—that will go up along with all that housing construction.